Bangladesh pharmaceutical market: Change Paradigm

Following the independence of Bangladesh in 1971, the local manufacturers had less than 15% market share in an industry dominated by large multinational corporations (MNCs). A decade after Bangladesh was created, there were 166 pharmaceutical manufacturers, but little had changed for them; 75% of the market was still dominated by eight MNCs. There had been some growth in the local companies but 25 medium-sized companies produced only 15% of the products and the remaining 10% was manufactured by another 133 other small local companies. Thus, Bangladesh pharmaceutical market was traditionally an import-oriented market. However, gradually market scenario changed over the years, and now, 97% of the products are locally manufactured. This is a significant achievement, considering that many countries like Singapore import 75% of their pharmaceutical products even today. In the past ten years, the Bangladesh pharmaceutical market has doubled its growth, reaching a total audited value of US$ 932 million in the third quarter of 2010. Dynamic, vital, and blessed with a consistent 6% gross domestic product (GDP) growth, the country was recently named on the Goldman Sachs "Next Eleven" list as well as the JP Morgan "Frontier Five." There are enough reasons to believe that Bangladesh stands poised to join China, India, Brazil, and Russia as a country that represents significant potential to become a global manufacturing pharmaceutical hub. Presently, the Bangladesh market is dominated by the local players. The top 10 companies in Bangladesh, all of which are local companies, contribute 68% to the total market, while the top 20, just four of which are multinational, contribute 84%. All told, nearly 200 manufacturers are responsible for the 8,000 branded generics now available to the local population. Competition is intense, but the branded generics nature of the market enables top companies to command premium prices and ensure a return on their investment. The Bangladesh pharmaceutical market is heavily retail oriented, with the bulk of distribution undertaken by the companies themselves, leaving wholesalers to play a limited role. Patients must advocate for themselves within the system, as health insurance is virtually non-existent and patients are expected to pay the full price for medicines. The global pharmaceutical market grows at a rate of 6.7%, Afro-Asian market, at a rate of 15.7%, and Bangladesh market, at 24.58% on an average per annum. Hence, the momentum of the market has been more intense for Bangladesh. Some events led to this transformation of Bangladesh from import to export-oriented country. It essentially started from 1982 drug policy. Before the 1982 Drug Ordinance, there were 122 foreign companies exporting drugs to Bangladesh from 23 countries. After 1982, the local industry flourished. The policy encouraged local production and led to investment in pharmaceutical infrastructure of the country. In 1985, seven out of the top 10 companies were MNCs. BPI (now Sanofi aventis) and Glaxo (now GSK) were the top MNCs occupied number two and three positions in the lead table respectively. Now in 2010, all 10 are local companies. Cumulative market share of the top five MNCs is now 9.15%, down from 30.33% in 1985. Also, on products chart, seven of the top 10 were MNC products like Flagyl, Indocid and Aldomet. Now, among the top 10, there is only one MNC product in top 20 lists (Voltalin of Novartis). The 2005 drug policy came with a new hope to Bangladesh becoming a global hub for pharmaceutical finished products. The law now permits complete buy-back with manufacturing of drugs that are not even registered in Bangladesh. Newer models have emerged like contract manufacturing for local consumption as well as export. There have been some interesting trend shifts in the market itself. Rapid urbanization and lifestyle changes led to a shift in disease patterns and pharmaceutical products consumption. The market is, slowly but surely, shifting from acute care to chronic care. Another import shift has been spreading of pharmaceutical business across the country. In fact, areas like Chittagong and Rajshahi now have higher growth rate than Dhaka. Growth in Chittagong and Rajshahi is 24% and 33%, respectively whereas growth in Dhaka is 18%. Direct sales of the companies are a distinct feature of the industry that cuts the need for the middle man. The role of wholesalers is on decline noticeably; their contribution stood only 16.19% in 2010, down from 20.73% in 2008. A factor that contributed to market trend shift was the level of investment by the pharmaceutical companies. In the recent time, companies are manufacturing everything from pellets to freeze-dried injections to IV amino acids. Even manufacturing of anti-cancer drugs and lipid-based anesthetic injections is now a reality. Establishment of new GMP plants is an indication of the growth possibility of Bangladeshi companies in international market. The initial struggle of the industry was to overcome the import dependence. With the passage of time, newer challenges are surfacing like manufacturing of high-tech products, being a global exporter of medicines and backward integration (manufacturing of APIs, packaging materials, etc.). A new frontier of pharmaceutical business is opening with establishment of international-standards hospital facilities. If health insurance becomes popular, then it would add to the possibilities of bigger market for the pharmaceutical companies, as more patients then would be able to afford medicines. In fact, if we look closely, we will see that therapeutic class performance of Bangladesh is actually following that of global market, may be lagging behind a few years only. Low manufacturing labour cost, availability of relevant manufacturing technology and entrepreneurial assertiveness are important factors that will lead Bangladesh to become a major emerging market, both in terms of local consumption as well as export. Change in affordability, strength of continuous investment, rapid spread of urbanization and education will result in high growth of the industry in the coming years. The writer is Managing Director IMS Health Bangladesh & Sri Lanka